House & Senate eye raid on Environment Trust Fund
We have a new leader in the clubhouse for bad ideas this legislative session: Raiding $47 million from our Environment & Natural Resources Trust Fund to pay debt service on bonding projects.
It's not only unnecessary but unnecessarily expensive, not to mention a violation of Minnesota voters' trust!
Eager to learn more about why this raid on dedicated, voter-approved environmental funding is a terrible idea? Allow us to oblige...
The Trust Fund
In 1988 (and twice since then), Minnesota voters approved a constitutional amendment to dedicate a portion of Minnesota’s lottery proceeds to projects that support clean air and clean water. Since then, the Environment & Natural Resources Trust Fund (ENRTF) has invested millions of dollars in research and restoration statewide.
Unbelievably, the Legislature is now looking to raid the ENRTF and use its annual revenues to pay debt service on bonding projects – a dramatic and unprecedented departure from the traditional use of these dedicated funds.
The House and Senate’s bonding proposals are too small to fit $47 million in much-needed funding to upgrade water infrastructure across the state – especially in small communities that lack resources for these expensive but critical fixes.
Rather than increase the size of the bonding bill, legislators have made headlines by eyeing an unprecedented source of funding to pay back state bonds: the Environment & Natural Resources Trust Fund.
While the House and Senate bills differ, proposals from both Senator Westrom (R – Elbow Lake) and Rep. Heintzeman (R – Nisswa) look to use “appropriation bonds” language that authorizes $47 million in bonding that would be serviced (paid back) through the ENRTF instead of by the state.
This raid on dedicated environmental funding is a terrible idea for many (nine) reasons. Buckle up, readers, let us count the ways:
- Raiding environmental funds: The interest costs alone on $47 million worth of appropriation bonds could exceed $25 million in additional costs to the ENRTF, denying much-needed funding for environmental restoration across the state. Given that state general fund money for the environment is already at historic lows (about 1%), further raids on environmental funding are unacceptable.
- Illegal substitution: This proposal violates Minn. Stat. 116P.03 (a) which provides clear direction for the ENRTF and states: The trust fund may not be used as a substitute for traditional sources of funding environmental and natural resources activities. Debt service on bonding projects has always been paid for out of the state’s general fund, making this a clear case of substitution.
- Higher interest rates: Why pay more? The ENRTF is funded by future lottery money and is not backed by the full faith and credit of the state, so it comes at a higher interest rate. Meaning we all pay more for the same projects.
- Violates voter intent: When voters approved the dedication of lottery funds for the environment, it came with a very specific caveat (Minn. Stat. 116P.08 Subd. 2): Money from the trust fund may not be used for…municipal water pollution control under authority of chapters 115 and 116. The proceeds from the proposed bond authorization would be targeted for purposes expressly excluded from eligibility.
- Sets a terrible precedent: There is absolutely no precedent for dedicated environmental funds being used this way. Once this precedent is set, every dedicated fund in the state becomes at risk for legislative raids in future years.
- The payback period is longer than the life of the trust fund: This proposal would raid the fund until 2040, though the fund's revenue source constitutionally expires December 31, 2024.
- No public process: Despite the dramatic and far-reaching financial consequences, this proposal has neither been vetted by the public nor by the Legislative-Citizen Commission on Minnesota Resources (LCCMR), the body charged with evaluating proposals for the ENRTF. Minnesotans expect and deserve an opportunity to voice their opinions about spending from constitutionally dedicated funds.
- They can just bond for it: The state budget office has concluded that Minnesota can afford a bonding bill in excess of $3 billion this year. The House & Senate are asking for just $825M. The House and Senate could simply increase the size of their bonding bills.
- We have a state budget surplus: The State of Minnesota has a considerable budget surplus and could fund all of this with cash right now if it so desired.
In summary, this eleventh-hour, unvetted and impractical proposal to borrow for projects at higher interest rates from a dedicated environmental fund in violation of precedent, common sense and state statutory guidelines despite both an existing state budget surplus and lower-cost traditional borrowing alternatives is unwise and totally unnecessary. Phew.
An easy fix
Luckily, there is an easy fix before Gov. Mark Dayton and legislators!
The Minnesota's Public Facilities Authority, Governor Dayton and the bi-partisan Legislative Water Commission have all recommended $167 million in bonding for water infrastructure this year – about $47 million more than legislators are considering. This figure, $47 million, just happens to be the same amount that legislators are attempting to claim from the ENRTF.
Join us in calling on Gov. Mark Dayton and legislators to protect the ENRTF by fully funding water infrastructure through traditional state bonds. We’ll have cleaner water and a healthier environment while protecting our voter-supported trust fund!
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